Three-way Investment Decisions with Decision-theoretic Rough Sets

Abstract

The decision-theoretic rough set model is adopted to derive a profit-based three-way approach to investment decision-making. A three-way decision is made based on a pair of thresholds on conditional probabilities. A positive rule makes a decision of investment, a negative rule makes a decision of noninvestment, and a boundary rule makes a decision of deferment. Both cost functions and revenue functions are used to calculate the required two thresholds by maximizing conditional profit with the Bayesian decision procedure. A case study of oil investment demonstrates the proposed method.